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A consortium of key shareholders, holding over 30 per cent stake in Byju’s, on Thursday, issued a notice to the embattled edtech firm, calling for an extraordinary general meeting (EGM) to address “persistent issues”, including a proposed change of management at the firm. These shareholders will vote in an attempt to alter the company’s existing board, which includes asking Byju Raveendran to step down as chief executive officer (CEO) and relinquish his operational role at the firm, sources said.
“This is a fallout of what has been happening at the company over the past two years, including lack of transparency and trust, and incomplete audits,” said a person familiar with the matter. “Investors don’t want him (Raveendran) to quit. He has his strengths. But these shareholders want him to step aside from the operational role.”
An email query to Byju’s remained unanswered.
In accordance with the rights granted to shareholders under the Companies Act, 2013, a notice was issued to Byju’s parent firm, Think & Learn Private Limited (T&L), requesting an EGM to address persistent issues relating to corporate governance, mismanagement, and compliance. This request is supported by a consortium of T&L shareholders and follows earlier notices of requisition sent to the T&L board of directors in July and December 2023.
“The resolutions being put forward for the EGM to consider include a request for the resolution of the outstanding governance, financial mismanagement, and compliance issues; the reconstitution of the board of directors, so that it is no longer controlled by the founders of T&L; and a change in leadership of the company,” the investor group said in a statement on Thursday.
The current board of Byju's parent, Think and Learn, include Raveendran, his wife and Byju's co-founder Divya Gokulnath, and his brother Riju Ravindran.
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Investors have been urging Byju Raveendran to step aside from the operational role. However, this is the first time that a section of shareholders has formed such a group and issued a statement seeking to change the management. They said they have been flagging the persistent issues since the resignation from the Board in June 2023 of directors nominated by Prosus and some other shareholders.
“While we are grateful for the efforts of the independent advisory council in addressing some of the looming challenges facing T&L, we are deeply concerned about the future stability of the company under its current leadership and with the current constitution of the board,” stated the group of shareholders.
The company has raised a total of $5.08 billion from investors, such as General Atlantic, Sofina, the Qatar Investment Authority, Prosus, Sumeru Ventures, Vitruvian Partners, BlackRock, Chan Zuckerberg Initiative, Peak XV, Silver Lake, Bond Capital, Tencent, and Tiger Global, according to data platform Tracxn.
The trigger for the group of key shareholders to issue a notice to the edtech firm for an EGM goes back to last year. In June 2023, Byju's auditor Deloitte Haskins & Sells resigned from its role as the company was delaying filing financial results. Following the auditor's resignation, the representatives of the firm's top three investors — Prosus, Peak XV Partners, and Chang Zuckerberg Initiative —also resigned.
Lifting the veil on what prompted the resignation of its director from Byju’s board, Prosus, one of the earliest and largest investors in the edtech company, later said that the Indian firm’s executive leadership “regularly disregarded advice and recommendations relating to strategic, operational, legal, and corporate governance matters” despite repeated efforts.
Later, Byju's appointed BDO as its statutory auditor for five years. It also formed an advisory council, including Rajnish Kumar, former State Bank of India chief and current chairman of BharatPe, and Mohandas Pai, former chief financial officer of Infosys.
However, the company was facing various issues but investors came to know about them via press reports, according to industry sources. The issues include the Ministry of Corporate Affairs (MCA) ordering an inspection of Byju's books, the Board of Control for Cricket in India (BCCI) claiming that the firm defaulted on a payment, and the Directorate of Enforcement conducting searches and seizure action on the premises of Byju’s.
According to the sources, the request for an EGM was sent in December, too. The period for that lapsed as the management did not call for such a meeting.
The people familiar with the matter said that the EGM meeting is not related to Byju’s recent move to raise $200 million by way of a rights issue to all its equity shareholders, aiming to support growth and achieve operational sustainability.
If Byju’s raises $200 million, its post-money valuation will be between $230 million and $250 million, a 99 per cent drop from the $22 billion valuation the firm had in 2022, according to the sources.
